Aave Oracle Glitch Triggers $26M in Unfair Liquidations

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Good Morning.

Aave just handed DeFi's critics a gift. $26M wiped from 34 accounts, not by hackers, not by a market crash, but by a team that forgot to check an onchain rate cap before running an offchain update.

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In Today's Email:

• What Matters: Aave Oracle Glitch Triggers $26M in Unfair Liquidations 💸 

• Case Study: Goldman Sachs Leads XRP ETF Holdings 🔎 

• Governance & Features: Sonic Labs Launches Native Stablecoin USSD 💵 

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WHAT MATTERS

Aave Oracle Glitch Triggers $26M in Unfair Liquidations

State of play: A misconfiguration in Aave's Correlated Asset Price Oracle (CAPO) caused $26M in unfair wstETH liquidations on March 10, affecting 34 accounts across its Ethereum Core and Prime instances.

• A snapshot ratio mismatch caused CAPO to report a capped exchange rate of ~1.1939 vs the actual ~1.228, triggering liquidations of ~10,938 wstETH.

• The root cause was an offchain process oversight that failed to account for an onchain constraint limiting snapshot ratio increases to 3% every 3 days.

• Third-party liquidators profited ~499 ETH from the glitch, though Aave itself did not accrue any bad debt.

• Chaos Labs intervened by reducing wstETH borrow caps and realigning snapshot parameters to restore the correct oracle value.

• Affected users will be reimbursed using 141.5 ETH recovered from the incident plus up to 345 ETH from the DAO treasury.

Why it matters: A $26M oracle glitch on one of DeFi's biggest protocols shows that even battle-tested infrastructure can break from basic off-chain oversights, shaking user trust at a critical time for institutional DeFi adoption.

Our take: Chaos Labs responded well and the comp plan is a good look, but missing a simple on-chain rate cap constraint is a costly oversight for a protocol managing billions in TVL.

For builders and investors: Audit your offchain processes and oracle parameter constraints, not just your smart contracts, that's where the next accident is hiding.

CASE STUDY

Goldman Sachs Leads XRP ETF Holdings

Goldman Sachs topped spot XRP ETF holdings at end of 2025 with ~$154M, out of $211M held by the top 30 investors. With $1B+ in cumulative inflows and most holders not filing 13Fs, analysts say the real demand is far bigger than what's visible.

• Goldman Sachs held nearly $154M in spot XRP ETF shares, dwarfing other top 30 holders who collectively held $211M.

• Only a small portion of XRP ETF investors are visible, as most don't meet the $100M threshold requiring 13F filings with the SEC.

• Bloomberg analyst Eric Balchunas believes the hidden demand is driven largely by XRP "super fans" rather than casual retail investors.

• Spot XRP ETFs crossed $1B in cumulative inflows by end of 2025 and reached $1.44B in combined AUM as of last week.

• Several firms offer spot XRP ETFs including 21Shares, Bitwise, and Franklin Templeton, with 21Shares' XRP fund being its most popular altcoin product.

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INSIGHTS

Bitwise CIO: Bitcoin Could Hit $1M Competing With Gold

State of play: Bitwise CIO Matt Hougan reiterated his $1M BTC price target, arguing the global store-of-value market could hit $121T in a decade, at which point BTC only needs 17% share to get there.

• The global SoV market sits at ~$38T today, with gold at ~$36T and BTC at ~$1.4T, giving BTC just under 4% market share.

• If the SoV market grows at its historical ~13% CAGR, it could reach $121T within a decade, at which point bitcoin only needs ~17% share to hit $1M.

• Hougan points to spot BTC ETFs becoming the fastest-growing in history.

• Bitcoin's declining volatility is pushing some professional investors toward 5% allocations, up from earlier 1% recommendations.

• Hougan acknowledged risks but noted projections could prove "too conservative" if government debt and fiat debasement fears accelerate SoV demand.

FEATURES & GOVERNANCE UPDATE

Sonic Labs Launches Native Stablecoin USSD

Sonic Labs is rolling out USSD, a native stablecoin backed by tokenized Treasuries from BlackRock, WisdomTree, and Superstate, built on Frax's modular frxUSD infrastructure.

• USSD was built using Frax's GENIUS-compatible frxUSD infrastructure, a modular backend system designed for white-labeling institutional-grade stablecoins.

• The token is backed by tokenized US government debt products from BlackRock, WisdomTree, and Superstate.

• Users can mint USSD from 10+ chains directly to Sonic via LayerZero, and redeem it back to USDC on any chain supported by Circle's CCTP.

• Sonic Labs sees USSD as a "foundational step" in its vertical integration push, aiming to tap institutional yield at the base layer and fund ecosystem buybacks.

• Sonic is an EVM-compatible L1 targeting 100s of thousands of TPS with near-instant confirmations, currently ranked among the highest-throughput chains in its category.

Other notable feature updates:

• Sui launches USDsui.

• Theo Network launched thUSD.

• YieldNest integrated with Cap Money.

• Lido announced Lido V3 Phase 3 is live.

• Lido DAO is seeking approval for a $5M Treasury allocation.

• Markets.xyz launches 24/7/365 commodity trading on Hyperliquid L1.

QUICK BITES

• Bernstein sees 70% upside for Circle.

• Goldman Sachs emerges as top XRP ETF holder.

• Bitwise CIO reiterates BTC price could reach $1M.

• CFTC’s Selig says 'America is now the crypto capital of the world.'

• Tokenized stocks surpass $1B as Ondo, xStocks dominate sector.

• TD Cowen says Congress likely getting closer to banning a Fed CBDC.

• ABA finds consumers support stablecoin yield limits tied to banking risk.

• Aave suffers oracle glitch, triggering $26M in unfair wstETH liquidations.

• Crypto hacks fall to $49M in February as attackers shift to phishing scams.

• CFTC chair backs blockchain-based prediction markets as ‘truth machines.’

NOTEWORTHY READS & MEME

• YAM’s read on AAVE’s Oracle Glitch.

• IOSG’s read on On-Chain Yield Landscape.

• Stacy’s read on a16z Playbook: How to build in Web3 in 2026?.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.